by Michael J. Dwyer, Principal and Head of Plan, Cost & Review Group

Construction costs are starting to creep up in most major markets. Arena and stadium costs are also increasing. Many construction costs related to stadiums, arenas, and ballparks are higher than standard construction, due to many factors. A typical new stadium is often built adjacent to an existing stadium and the sequencing of demolition of the old, to make way for the new, often brings challenges. Some of the stadiums are built on a footprint that actually encompasses a portion of the old footprint, so sequencing of the work is critical. It is also sometimes hampered if the team is winning and post-season play delays vacancy.

Construction costs for concrete, steel, drywall, conveying systems and MEPs increase with every other construction market. New technology, seen in scoreboards and video equipment, state-of-the-art or local market suite finishes can impact the stadium budget.

There are other cost impacts that must be considered; concessionaire agreements often have required equipment, finishes, and soft goods. It is not so uncommon that the Owner will anticipate running the concessions at closing and then prior to completion a Concessionaire will be retained. There are many reasons that can occur. City/State requirements have a significant impact on the construction costs of stadiums, arenas, and ballparks. Whether it be significant permit fees, off-site improvements, or other items, these requirements need to be priced out and budgeted for from early in the process.

For budgeting purposes, Stadium construction costs are generally around $450/sq. ft. In general, anticipated line item construction costs are as follows:

Merritt & Harris, Inc. has been providing construction cost analyses for over 77 years and our industry leading cost reviews are essential to the loan process. Over my career at Merritt & Harris, we have provided cost analyses for 35 stadiums, arenas, and ballparks. If you would like to discuss your project or have general construction cost questions, please contact me at 212.697.3188, ext. 309.

by Michael J. Dwyer, Principal and Head of Plan, Cost & Review Group

A leading indicator of future non-residential construction spending hit a seven-month high in September 2013, which has many experts predicting a greater-than-expected 17% boost in commercial construction in 2014. The Architecture Billings Index (ABI) produced by the American Institute of Architects continued to accelerate in the fourth quarter of 2013.

Improvements in the bank lending environment will help the anticipated growth. A number of investment alternatives are also providing the financing of commercial construction projects. Overseas investors, such as those that comprise EB5 funds, are contributing to the decrease in lender risk and improved loan to value ratios.

Much of the anticipated growth in 2014 is expected to be in the hotel and hotel/resort construction. Four-diamond and five-diamond hotels are anticipated to start construction in a number of metropolitan areas where the resurgence of leisure travel is increasing the need for better/newer hotels.

While new construction is expected to increase, a lot of the activity is anticipated to be related to renovation projects. Many owners are also focusing on the property improvement plans (PIPs) which are required of the brand ownership. Much of the PIP work is focused on infrastructure improvements, such as heating, ventilation and air-conditioning; lighting systems; power; and mechanicals. Restorations of lobbies, restaurants and meeting rooms are also major areas of needed improvement.

Hotel construction costs are anticipated to increase by roughly 3% in 2014. In general, anticipated line item construction costs for a high end hotel are as follows:

Product Improvement Plan construction costs typically range from $30,000 to $50,000/key, when incorporating common areas, restaurants, and exterior improvements.

When comparing project budgets to conventional historical data, there are many aspects of the actual project that require evaluation. Location factors, which are percentage adjustments for particular localities, are applied to mean cost estimates. Construction inflation factors, which are cost adjustments to historical data to reflect the latest labor rates and material cost adjustments for a particular locale, must also be applied. Lastly, the level of finish will have a significant effect on construction pricing.

Merritt & Harris, Inc. has been providing construction cost analyses for over 76 years and our industry-leading cost reviews are essential to the loan process. If you would like to discuss your project or have general construction cost questions, please contact me at 212.697.3188, ext. 309.

by Michael J. Dwyer, Principal and Head of Plan, Cost & Review Group

In many careers, it is not always common to meet and work with a great person. In my short career at Merritt & Harris, Inc. I have actually had the opportunity to work with 2 great men; Buzz Harris and Tom Richard. Both of these men were true leaders, mentors, and great friends.

Tom Richard is a true friend and was always a great leader. He took the reigns of Merritt & Harris at a time when the construction industry was in tough shape. Tom brought the firm together. He rebuilt the management of the firm, practically from scratch, and led us with professionalism, compassion, and pride.

Years ago, it was common for employees to start and end their careers with just one company. That does not happen very often anymore, but it is quite common here at Merritt & Harris. I believe that the longevity of many members of our firm is due to the family-oriented, caring, and recognition that Tom would always provide to each and every employee.

For myself, I know personally how caring Tom is and I am thankful. I had a medical emergency back in 2007 and, without hesitation, Tom flew down to Florida to be with me and my family through this time of need. Work was put on hold, while family needs were brought to the forefront. In my opinion, this is what makes a great leader. While we always work hard, strive to make profits, and look at the bottom line, when family calls, everything else should take a backseat.

Tom Richard would also take the time to train new, and not so new, employees. Tom’s work ethic, knowledge, and expertise as a Construction Consultant have always been looked upon by so many as “that’s how good I want to be.” Tom’s contributions to the industry, by being a panelist at so many forums, contributing author of the condition survey ASTM standards, and, well, his knowledge of stadium seating, are just a few of the many ways Tom improved our industry.

As an avid New York Giants fan, Tom is fully aware of how sometimes things can be very good and other times they can be really, really bad. Not being discouraged and persevering in unwavering support are certainly characteristics of Tom’s both on and off the field.

As a friend, co-worker, and student, I thank Tom Richard for all that he has done for me, my family, and our firm. I wish him and his family many years of good health, good times, and I hope the Giants improve.

by William McCallion, AIA, LEED AP, Manager of Quality Control & Training 

Has the time of high-rise prefabrication finally arrived?

Why has the construction industry been so late to the prefabrication party? The automotive, aerospace and even shipbuilding industries have been doing it for decades by utilizing sophisticated 3-D computer modeling to further perfect their design and assembly. Of course, the overriding advantage in these industries is the size of the companies and the number of units they produce. Unlike other industries, building construction tends to be more fragmented with few companies reaching the national or international market; most are local or regional.

However, the introduction of BIM (Building Information Modeling) and IPD (Integrated Project Delivery) in design are providing an opportunity for change. Knowing exactly what a building’s design is before putting a shovel in the ground provides enormous advantages which also enables the manufacture of components prior to erection whereas in traditional design many issues are worked out in the field as the project progresses leading to lost time and a greater potential for Change Orders.

Prefabrication is not new, but it has been limited and most of the market is for modular homes. Other successful areas have been the manufacture of components such as precast elements like T-Beams in garage structure or precast exterior wall panels. Exterior wall panels have become quite advanced and can now be shipped with face brick and windows installed. However, the holy grail of an entirely prefabricated large scale building has only rarely been achieved. This is changing.

First, why build utilizing prefabrication? Some of the reasons are:

• Accelerated erection time is the main advantage to prefabricated construction allowing the erection of a structure to be accomplished in months rather than years. Besides the time savings it also minimizes the disturbance to neighboring building occupants with less noise, dust and traffic.
• Producing a product in a climate-controlled shop allows for great worker comfort and safety giving an advantage of attracting workers who do not enjoy the rigors of “stick built” construction. In an increasingly competitive labor market, this could be the advantage that wins the bid. In the future we could see prefab plants utilizing robots to either perform work or to assist the workers, e.g., by rotating a component to where the worker is instead of having the worker moving to the component, something that is common in the automotive industry.
• Quality control is more easily monitored and achieved.
• The potential for a more environmentally friendly construction process, reducing waste at the plant, and pollution generated by truck traffic.

It may seem intuitive that prefab saves cost. This has not been borne out at this time, primarily due to the limited scale of the projects that have utilized it.

Prefab is not without its problems. Gaining height is problematic as the modules are usually self-supporting, the lower one bearing the weight of the next one. Some type of frame may need to be erected to permit higher structures. The foundation must be constructed to exacting standards since there is no ability to alter a prefabricated module once it gets to the job site. In addition, since the prefab facility is often in a different jurisdiction than the site, perhaps across state lines, there could be code issues. The path of travel of the modules must be precisely calculated and the width of the modules’ trailers must be permitted by the jurisdiction they travel through. And finally, union requirements also need to be considered.

Prefabrication lends itself toward repetitive components and is ideal for hospitals, dormitories and residential projects. One of the links below contains a video of a modular hospital being built from start to finish.

So, what is the current state of prefabrication? It is getting pretty interesting in New York City. A recently completed mid-rise residential building is being completed in the upper part of Manhattan.

The tallest prefabricated building in the USA is under construction in Brooklyn. The first modules are being set at the 32-story residential building at the Atlantic Yards Development. (Merritt & Harris provided consulting services for the Barclay Center at Atlantic Yards.)

In addition the first “micro” unit building in NYC will be constructed on E. 27th Street in Manhattan and will utilize prefabricated modules.

And the most mind-blowing achievement might be the planned Sun City tower in China which will rise to 202 stories making it the tallest building of any kind. Details about the prefabrication methods are sketchy but some photos have leaked out purporting to show the prefabrication in progress.

http://homes.yahoo.com/news/going-up–tallest-prefab-building-in-the-world-sparks-modular-housing-boom-201126710.html

http://www.treehugger.com/modular-design/ground-broken-sky-city-worlds-tallest-prefabricated-or-any-kind-building.html

http://www.youtube.com/watch?v=u49p9qXcsXg

http://www.youtube.com/watch?v=5_0U8pTlCpw

by Mike Dwyer, Principal, M&H Cost & Review Group

At the height of the economic downturn, more than 700 construction projects were idled across New York City’s five boroughs, according to the city’s Department of Buildings. Three years later, new construction has returned, and many of the once idled projects are being redeveloped; some are being repurposed. Over $20 billion worth of new construction starts occurred in 2012, primarily due to the groundbreaking of the first office tower at Hudson Yards, for which we are proud to provide construction review and monitoring services. Since the beginning of 2013, another $8.5 billion worth of new construction has started, which is a 16% increase over the same period last year.

The 20 U.S. Cities With The Most New Construction
New construction for the entire country was up 10% in 2012, and experts predict it will climb another 12% in 2013. The biggest driver of that recovery is the multifamily housing being built in many metro areas.

Commercial building starts rose 10% in 2012 and are expected to rise another 15% in 2013. One of the major factors weighing commercial development down is financing, which temporarily dried up and still remains tight.

Construction costs are starting to creep up, year over year, with increasing steel and other metal prices. Labor costs have not seen a full recovery and, with the end of the PLA (Project Labor Agreement) credits, labor increases are, undoubtedly, not far off.

As much as many pessimists say we are still not seeing the light at the end of the tunnel, I suggest that if you look back just a few years, the light is closer than you might expect.

The construction industry is one of the largest indicators of how our economy is doing. Since 2012, we have seen the construction a number of projects completed and units sold. That’s how financing becomes available.

Before a closing, our plan and cost reviews provide the lender and/or investor with critical information about the entire construction project. Plan development, budget development and schedule accuracy are key elements that are just a part of our review. If you have a project being considered for financing and would like to discuss how Merritt & Harris, Inc. can assist you, please feel free to contact us.

by Mike Dwyer, Principal, M&H Cost & Review Group

Optimism prevails among architects and engineers as new construction planning appears to be increasing. The Architectural Billing Index (ABI), an indicator of construction work entering the pipeline due to active projects on the boards of architectural offices, is rising steadily and shows the strongest growth since 2007. Improved design coordination and competitive pricing by prospective contractors bode well for budgeting of construction projects. At Merritt & Harris, analyzing a construction budget goes much deeper than just analyzing the numbers.

Each trade line item is reviewed based upon the plans, specifications, and project documents. Foundations are priced in accordance with the geotechnical engineer’s recommended foundation system. When analyzing other trade prices, we need to be aware of any special systems and/or materials, or unique project requirements defined in the plans. While the specifications are critical to pricing, other factors and documents need to be considered.

The construction contract needs to be reviewed to ascertain what the contractor intends to provide. Are there large allowances for undefined scopes of work? Does the contract alter the specifications? Is the construction schedule achievable? Has the contractor built similar projects? How much of the budget is confirmed with actual subcontractor bids?

The professionals of record agreements also need to be reviewed. Not only do we expect the architects and engineers to provide the design, but it is important that they also review work as it progresses to confirm that it is in accordance with their design. Deviations in the field can often cause delays, stall the receipt of Certificates of Occupancy, or lead to excessive cost overruns.

Although the developer may not see the need for providing the many documents required for a review, a comprehensive analysis by the construction consultant is a key component to the success of the project.

Some interesting “red flags” we’ve seen in  budgets provided for review have been line items presented in alphabetical order; the statement, “There is no need for a contingency”; a note that the contract is a “lump-sum GMP”; and the declaration that the contract contains a “NOCIP (meaning no insurance).”

If you’d like to discuss more critical construction issues you may encounter in a pre-construction review, please email at mdwyer@mharrisinc.com  or phone me at 917-449-9248.

by Mike Dwyer, Principal, M&H Cost & Review Group

Construction Outlook Improving?

The design and construction industry seems to have mixed views on the outlook for the remainder of 2012 and 2013. An increase in demand for industrial facilities so far this year, along with sustained demand for hotels and retail projects, factors into what projects to be a modest (5%+/-) rise in spending this year for nonresidential construction projects.

Construction costs through 2012 have increased. Material prices have steadily increased throughout the year, pushing contractor margins (fees) lower to be competitive. With increased technology, such as BIM, there is less likelihood of “gray” areas in construction documents. Contractors who enroll in the BIM program will be able to produce more comprehensive pricing.

Along with improved technology is the increase in productivity. Firms that have been hardest hit by the past downturn in construction have made it through by trimming staff. New hiring is not expected to be very robust in the coming year.

During the plan and cost reviews performed by Merritt & Harris, we use our in-house staff of architects, engineers, and cost experts to assess the project from the owner’s prospective. A keen eye for “what is missing” is tantamount to a thorough budget analysis. A cost/sq. ft. study may give some comfort at the early stages of development, but digging into the details before construction commences, as our review staff does, is more effective.

Lenders and investors generally retain Merritt & Harris, Inc. early in the process. Having the consultant on board to review and lend expertise to the plan and budget evolution can save time and money in the long term.

2012 was a decent year for Merritt & Harris, Inc., and we look forward to working with our clients in 2013 and beyond.

On the first night of M&H Days, the principals of the firm hosted a 75th Anniversary cocktail party and dinner at The Ketch Restaurant in Manhattan. The gala celebration provided an opportunity for staff members of the three offices to mingle and get to know each other in a relaxed and upbeat atmosphere.   President & CEO, Manny Kratsios, spoke briefly and thanked all of the employees for their efforts in contributing to Merritt & Harris’ 75 years of providing exceptional consulting services.  Sylvia Cowie, who has been with the firm the longest (33 years), holds the anniversary cake in the photo.

On September 28th, 2012, the billion-dollar Barclays Center in Brooklyn, N.Y., opened with a Jay-Z concert and lots of hoopla. The rapper is an enthusiastic promoter of the borough of Brooklyn and a minority owner of the Brooklyn Nets, the NBA team that was relocated from New Jersey. By all accounts the arena and the evening were a big success with many stars among the wild and excited audience. Jim Cockinos, AIA, M&H Sports’ Senior Associate, who served as our Project Manager during construction, was in attendance.

Barclays Center is the 34th professional sports facility monitored by M&H Sports to open in the past 20 years. The Nets will play their first pre-season game in the Center on October 15th and will kick off their regular home season against the Knicks on November 1st.

The next M&H Sports project to open will be the Circuit of the Americas Formula 1 complex in Austin, Texas, (http://circuitoftheamericas.com/) home of the U.S. Grand Prix to be held this November 18th.  Following the Formula 1 complex opening, the next project to be completed will be the NFL’s 49ers Stadium in Santa Clara, CA (http://newsantaclarastadium.com/). The stadium is schedule to open for the 2014 NFL season.

Ricardo Flores, Principal and Los Angeles Branch Manager, heads the M&H Sports team on both projects.